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Consumers' rate-increase requests are prompted, in part, by government mandates that require utilities to reduce emissions into the air. Photo via Facebook

Consumers Energy requested rate increases in September for 2013 and 2014, and that has riled up the pair of organizations opposed to the state law that limits the amount of electricity that can be supplied in Michigan by other companies competing with the big utilities.

According to Consumers spokesperson Dan Bishop, the utility wants the Michigan Public Service Commission to allow it to raise rates that would increase its revenue by $148.3 million in 2013 and an additional $82.6 million in 2014.

Bishop said several factors are driving up Consumers’ cost of generating and delivering electricity to its 1.8 million customers. The big one is government mandates forcing utilities to reduce emissions into the air from coal-fired power plants. Other factors include improvements to make electric service more reliable and technology investments such as the smart meters.

According to its Sept. 19 application filed with the MPSC, Consumers plans to spend more than $6 billion over the next five years “to maintain and improve utility infrastructure and help ensure that the company’s customers receive the quality of service they expect.”

Bishop said “de-skewing” of the rates is also underway, as required by the state legislature in 2008. That means large industrial customers will no longer be paying a rate that in effect subsidizes residential customers. The actual cost of infrastructure required for delivering electricity to industrial users is far less than for residential customers, when weighed against the large volumes used in industrial plants. That’s the same reason why American cities were electrified long before rural areas, where potential customers were few and scattered.

Bishop said the proposed rate changes would reduce large industrial rates by as much as 6 percent, in some cases. Other industrial customers would see a decrease of 3 percent to 9 percent, and commercial customers “would see a modest increase,” said Bishop.

Residential customers would see the biggest increase, he said, estimated at about $9.50 per month on the average residential bill, which would bring it to about $100.

Energy Choice Now and the Customer Choice Coalition issued a joint press release Oct. 3 charging that Consumers is a powerful “monopoly” that plans “to stick Michigan residents with the bill.”

The two groups noted that Consumers got a rate increase in June of $118.5 million, “on top of an additional $118 million hike in December 2011.”

“Three mammoth rate hikes in the span of a year? That’s absolutely unacceptable,” said Wayne Kuipers, executive director of Energy Choice Now. “It’s devastating to Michigan residents who are already suffering from the highest rates in the region. We need competition now.”

According to the U.S. Energy Information Administration, a report on electricity cost in each state during July states that Michigan’s residential rate was slightly more than 14 cents per kilowatt hour, the highest in a group five states that also includes Illinois, Indiana, Ohio and Wisconsin. The next highest residential rate was Wisconsin with slightly more than 13.2 cents, and the lowest was Indiana at 10.3 cents. Michigan’s residential rate had been slightly more than 12.9 cents in July last year.

Commercial customer rates in July had Michigan at 10.95 cents and industrial at 7.67 cents, which were also the highest rates among the five-state region. In both cases, however, Wisconsin wasn’t far behind with rates of 10.53 cents and 7.38 cents, respectively.

Michigan’s overall retail electricity cost in July was 11.01 cents per kilowatt hour, the highest in the five-state region. Next highest was Wisconsin at 10.35.

Comparing all the states, 13 states have higher overall retail electricity cost than Michigan, while 36 have less.

Prior to Michigan’s sweeping 2008 energy legislation, there was no limit on the amount of electricity that could be purchased by Michigan customers from generating companies competing with Consumers Energy and DTE, including out-of-state suppliers such as Constellation Energy. The 2008 legislation capped the supply from competitors to no more than 10 percent of the total amount delivered to customers by the two major public utilities.

Companies and nonprofit organizations that are members of the “customer choice” groups say they could save money if they were allowed the “choice” of buying electricity from sources other than CE and DTE.

Pete Daly is a Grand Rapids Business Journal staff reporter who covers small business, banking and finance, food service and agriculture and government. Email Pete at pdaly at grbj dot com. Follow him on Twitter @PeteDalyGR

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